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Best’s Market Segment Report: Reinsurance Market for US Mortgage Credit Risk Matures

By: via Business Wire

U.S. private mortgage insurers continue to cede a meaningful portion of their premium to reinsurance, with the usage of unaffiliated reinsurance expanding considerably, according to a new AM Best report.

The Best’s Market Segment Report, “Reinsurance Market for US Mortgage Credit Risk Matures,” is part of AM Best’s look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo. Other reports, including AM Best’s ranking of top global reinsurance groups and in-depth looks at the Lloyd’s, life/annuity, health and regional reinsurance markets, have been published during August and September.

The shift in the private mortgage insurers’ business models following the 2015 implementation of Private Mortgage Insurer Eligibility Requirements by Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs), created opportunities for reinsurers to assume greater volumes of mortgage insurance risk. On average, according to the report, private mortgage insurers ceded 31.5% of premium in 2024, down slightly from 32.1% in 2023. In both years, more than half of the ceded premium was transferred to unaffiliated reinsurers—16.1% in 2024 and 19.1% in 2023.

“The share of premium ceded to unaffiliated reinsurers has increased markedly since 2016, reflecting the maturation of the traditional reinsurance market for mortgage risk,” said Wai Tang, senior director, AM Best. “Reinsurers have grown increasingly comfortable with this risk due to its consistently strong performance, as demonstrated by low loss ratios in recent years, and its diversification benefits within a broader property/casualty underwriting portfolio.”

Private mortgage insurers have also sourced substantial excess of loss reinsurance capacity from the capital markets through mortgage insurance-linked securities (MILS) transactions, which they have issued since 2015. Although private mortgage insurers continue to issue MILS transactions to maintain access to this risk transfer channel, there has been a decline in recent years in issuance with a corresponding drop in mortgage origination volume, driven by higher mortgage rates.

Another channel for reinsurance exposure to mortgage risk is the GSEs’ credit risk transfer (CRT) programs. Under these structures, reinsurers enter quota share agreements with protected cell companies, which in turn enter into excess of loss agreements with the GSEs. Consistent with trends observed in the MILS market, the lower number of mortgage originations have led to less CRT transactions. The report also notes that attachment points have risen in recent years and these transactions with higher attachment points will pay lower premiums to their reinsurer counterparties, making them relatively less attractive.

“Because U.S. mortgage credit risk remains attractive, reduced access to U.S. mortgage credit risk via the GSEs’ credit risk transfer programs may drive greater reinsurer interest in participating in private mortgage insurers’ traditional reinsurance structures,” said Matt Tuite, director, AM Best. “Overall, traditional reinsurers and capital markets investors have shown a robust appetite to provide capacity for mortgage credit risk.”

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=357461.

For global reinsurance reports ahead of Rendez-Vous de Septembre, as well as video coverage of the event, please visit AM Best’s Reinsurance Information center.

Lastly, AM Best will host its annual reinsurance market briefing at Rendez-Vous de Septembre on Sept. 7, 2025, at 10:15 a.m. (CEST) in Monte Carlo. For more information, please visit the event website.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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